How To Raise EUR6.5 Billion: A 10-Point Plan

10 ways BC Partners managed to reach the upper limit on its latest fund – though they all point to a difficult time for everyone else.

As everyone expected, the BC Partners fundraising has finished and by all accounts it has been successful. The firm had a strong track record and offered a few concessions to investors to help it hit its EUR6.5 billion upper limit but here are 10 other things that helped it on its way.

1) For a start, the timing of the fundraising in September 2010 – which came after most large firms had stayed away from the market for years – worked well for the firm. It found there was little competition around. It would probably find itself in a different position if it launched the fund now.

2) BC returned plenty of cash running up to the fundraising. It realised close to EUR6 billion for investors since the beginning of 2010.

3) The firm built up a large investor relations team of eight people, led by well-regarded ex-Goldman Sachs executive Charlie Bott. To put that in perspective, it raised its 2005 fund of EUR5.5 billion using two investor relations people.

4) Next, BC cast its net wide. It drew up a list of 1,150 investors and targeted 919 of them. They met with 525 and eventually about 200 became investors. According to Bott, the firm planned the fundraising “like an army campaign.”

5) No doubt as a result it increased its ranks of investors in new regions, particularly Asia. In the 2005 about 10% of investors were from Asia, this time around about 25% were. North American investors made up a smaller overall percentage of the fund, but Canadian investors were still very active. The investor base grew by 60%.

6) In addition to its ‘earlybird’ discount and adapted carry structure, which helped give the process early momentum, BC offered additional concessions to investors making very large commitments – this is standard industry practice but no doubt went down well.

7) Surprisingly, BC didn’t use placement agents, not any major ones anyway. Actually, it used two: one in Saudi Arabia and one in Holland, but they garnered only about 1% of the fund.

8) In contrast, the firm ended up using plenty of lawyers – though not by choice. It started with Clifford Chance as its adviser, but following partner departures to U.S. firms Simpson Thacher & Bartlett and Weil Gotshal & Manges it ended up with three legal advisers.

9) Investors were keen to probe the quality of the second tier of executives at the firm. “The more they probed the more they liked,” Bott said.

10) Finally, the firm estimates that the number of people hours required to raise the fund was about five to six times the amount required last time around.

Such a list might sound easy to disregard after the event but it offers a clear insight into the amount of effort required for a successful fundraising, which has become disproportionately large. As if anyone had any doubt, it means even the most successful firms have a tough job on their hands to raise money in this market.

-Paul Hodkinson is editor of Private Equity News, which is also published by Dow Jones.